Higher water bills may be in store for nearly 69,000 Tucson Water customers living or operating businesses outside of city limits.
Citing higher water usage and reportedly higher costs to service customers in unincorporated Pima County, officials are considering a rate hike of as much as 15 percent.
The differential rate would not apply to city residents, nor would it apply to residents of Oro Valley, Marana and South Tucson. It also isn’t being proposed by Tucson Water.
Instead, the rate hike would serve as a new revenue stream for the city as its primary source of income — sales taxes — is projected to be flat in the near term with more residents opting to shop online rather than inside traditional stores.
The proposal appears to have the backing of the majority of the Tucson City Council, which directed the city staff to bring back a detailed plan within the next six months.
The direction comes only a few weeks after the council signed off on a two-year plan to increase rates for all of Tucson Water customers and is a marked departure from treating Tucson Water customers equally, regardless of whether they are city residents.
The recent water rate hike was publicly vetted for months, with several models considered for increasing revenues. A differentiated model for selling water was not among them.
Any new revenue from county residents could be directed into the city’s general fund rather than into the coffers of the city-run utility.
The council has tried raising water rates on customers living in the county once before in the 1970s, but that ended badly. Angry residents launched the city’s first recall election. One council member resigned and another three were recalled.
The stated reason for increasing fees this time around is the cost of pumping water to areas outside of city limits, often uphill.
But the complex topographical layout of Tucson, paired with the 141 pumping stations scattered throughout the community, muddies the waters regarding how much it costs to service outlying areas.
Timothy Thomure, the director of Tucson Water, bristles against the suggestion that it costs more to pump water to outlying areas.
“Tucson Water staff are not making this argument. This topic sometimes comes up during the public discussion, and it could be a justification in some communities,” he noted.
But the argument fails when taking a closer look at the landscape inside the city limits, which spans 226.7 square miles.
A patchwork of agreements, some dating back decades, increases the utility’s service area to about 390 square miles.
Another issue raised is that residents in the county use more water city residents.
Recent figures from Tucson Water have city residents, on average, using roughly 5,534 gallons per month. Outside of the city, the number increases to 7,353 gallons per month.
The city does have rates tied to consumption, but as customers use less water, the city has become less reliant on such models.
Hunting for revenue
The proposed two-tier water rates are the result of pressure from elected leaders on City Manager Mike Ortega to identify new revenue streams.
In the last five years, city residents have backed two initiatives to increase city spending, first with Proposition 409 — a $100 million bond to improve city streets with a property tax increase — and later with Proposition 101, a temporary half-cent increase in the city sales tax to buy new equipment for first responders and to put another $100 million into city roads.
Residents may be asked again to sign off on a new $225 million bond this fall, with proceeds benefiting city parks, although the proposal reportedly will not increase property taxes.
The parks bond proposal would max out the city’s bonding capacity for the foreseeable future, forcing the city to look at more controversial and politically unpopular choices — including the differentiated model for Tucson Water customers.
Vice Mayor Paul Cunningham supports the water proposal, telling his colleagues last week that a 10 percent increase for county residents is extremely modest.
“It is not even close to what you’d be paying in Phoenix, which is closer to 50 percent,” Cunningham said, adding that unhappy customers have two options: become part of the city of Tucson or form another town.
In the long-term, Ortega said, charging county residents more for water could encourage some communities to consider becoming a part of Tucson.
At one time, the city had a policy of offering water to developers to promote annexation, but that has been replaced with a system in 2010 that dictates how a developer could ask for water service.
Many are asked to sign a pre-annexation agreement in exchange for getting water.
Some areas, primarily in areas just southwest of the city limits, are identified as requiring annexation to get water service. Other areas of Pima County are more complicated, with large swaths of undeveloped land in Pima County guaranteed water service as a result of decades-old agreements.
But Councilman Steve Kozachik rejected the proposal, saying it was a thinly veiled attempt to force annexation so the city can get more state shared revenues.
“It doesn’t cost us more to service customers in unincorporated Pima County. In fact, there are pockets in the city where it does cost us more to serve,” he told his colleagues. “We want more state shared revenues. That is really the nature of this conversation.”
He added that the revenue generated by the new policy may not even stay inside the utility, saying the council is just strong-arming county residents for cash.
“If we’re diverting these funds away from the utility, in honesty to the public we should add a line item to the water bill called ‘annexation fee.’ Our water service policy is doing just fine. This is extortion,” he said.
How much the rates will increase was not settled by the council, but the direction was to bring back increases between 5 and 15 percent. The city’s latest increase, which will start showing up on bills in July, would add $2.77 to the typical homeowner’s water bill, about a 7 percent increase.
Mayor Jonathan Rothschild argued that the city of Tucson is an outlier, as many Arizona cities already charge more to nonresidents for water service.
“In the state of Arizona, Phoenix, Scottsdale, Yuma, Chandler, Flagstaff, Glendale and Tempe all charge these differential water rates. It is actually the norm,” Rothschild noted. “And even out of state, Albuquerque and El Paso, they do it as well.”
As for Oro Valley, Marana and South Tucson customers, Ortega said he wouldn’t support similar increases.
“That’s a conversation for another day, I think we have opportunities to pursue that in a different way,” Ortega said last week.